Thanks for reporting this.
The table of packages to be updated looks suspicious:
Updating:
perl x86_64 4:5.8.8-23.fc7 updates-testing 11 M
Installing for dependencies:
perl i386 4:5.8.8-18.fc7 fedora 10 M
perl-libs i386 4:5.8.8-23.fc7 updates-testing 573 k
and then, among "Updating for dependencies:" perl-ExtUtils-Embed is missing.
What version of perl-ExtUtils-Embed do you have installed?
I guess it is -18.fc7.
So, when perl.x86_64 is set to be updated, and the "perl = 4:5.8.8-18.fc7"
requirement for perl-ExtUtils-Embed-1.26-18.fc7.x86_64 is broken, yum decides to
satisfy it by installing old "perl-4:5.8.8-18.fc7.i386," instead of updating
perl-ExtUtils-Embed to -23.fc7.x86_64.
Why on earth have yum decided to go this way?
A wild guess: try to remove (or disable) the allowdowngrade plugin, perhaps yum
will then be less eager to use obsolete package to satisfy a dependency.
But anyway, yum should prefer solving these situations by upgrading the package
which has just lost its requires.

okay, we have a couple of issues here.
for everyone who can replicate something like this please run:
rpm -Va --nofiles --nomd5
I just want to see how many of these are older errors polluting the rpmdb.

See also bug 253447 which looks like possibly related. In that
case 'package-cleanup --problems' does not report any issues, and
is it pretty obvious what to do to get things going there, but yum
somehow is unable to figure that out. yum-3.2.2-3.fc8

20070824 set brought updates from yum-3.2.2-3.fc8 to yum-3.2.3-2.fc8
and from yum-metadata-parser-1.1.0-2.fc7 to yum-metadata-parser-1.1.2-1.fc8.
After those yum is able to find out that an update of compat-db to
4.5.20-3.fc8 requires db4-devel and that, in turn, db4-cxx so bug
253447 can be closed.
It looks like that after those yum updates now yum "updates for
dependencies" packages which should be updated anyway. For example:
Updating:
neon-devel x86_64 0.27.0-1 development 157 k
openoffice.org-calc x86_64 1:2.3.0-2.2.fc8 development 7.5 M
openoffice.org-impress x86_64 1:2.3.0-2.2.fc8 development 1.6 M
openoffice.org-math x86_64 1:2.3.0-2.2.fc8 development 1.3 M
openoffice.org-writer x86_64 1:2.3.0-2.2.fc8 development 3.0 M
Installing for dependencies:
libtextcat x86_64 2.2-3.fc8 development 131 k
Updating for dependencies:
neon x86_64 0.27.0-1 development 107 k
openoffice.org-core x86_64 1:2.3.0-2.2.fc8 development 78 M
Seems a bit weird but so far I did not notice truly undesirable
side-effects so possibly this is benign.

yum-3.2.4-2.fc7.noarch still fails for me (comment #7) in the same way. It
looks like yum doesn't know to upgrade rpm-devel.i386 to the new version (and
probably popt.i386 eventually if it would ever get that far).
I can open a new bug report if this is a different bug from the original.